Friday, April 26, 2013

April was disastrous for Google on the Android patent front: eight major losses, two smaller wins

April 2013 was a mensis horribilis for Google on the Android patent front. With nothing being scheduled for the last few days of the month that could bring good news for Google on the smartphone patent front, let's look at this month's major events relating to Android patents. Without a doubt, Google is on the losing track, and as BusinessInsider wrote in a headline today, "It's Becoming Clear Google Overpaid For Motorola". It's always been clear to me. I doubted the patent-related logic of this deal from the day it was announced -- on this blog (first reaction, follow-up) and in numerous interviews. But a lot of people just looked at the number of patents in play and thought that all "wireless" patents are automatically supervaluable and believed in "mutually assured destruction", while skeptics like me were considered to be deniers. Others figured it out long before yesterday's publication of a FRAND rate-setting decision concerning Motorola's standard-essential patents (SEPs) -- but most people still didn't. With all that has happened so far, the fact that Google is losing out on the smartphone patent front is now easier to see than it used to be.

I cover all major smartphone patent news involving disputes and dealings between major operating companies (and a few select cases involving non-practicing entities), no matter who wins or loses. During this month, Google lost most of the time, especially on several strategic issues, and won only a couple of little things of very limited value in Germany (which it didn't even win alone; it merely complemented other companies' successful defenses).

Over the course of the month, things got worse and worse for Google. I will now list the relevant decisions (including license deals) in chronological order and rate them with MAJOR, MEDIUM-LEVEL and MINOR:

Samsung had been cleared of infringement by the Mannheim Regional Court anyway, and Motorola had to comply with an injunction it was able to work around. Most patents aren't valid as granted (case in point, Apple took down a Samsung 3G SEP the following week). It's nice to defeat one iPhone patent, but Apple has so many of them... It's not the most strategic patent, but it is a signature iPhone feature. Google's Motorola contributed to this win as Samsung's co-plaintiff. (HTC had also contributed to this, very significantly based on what I heard, but dropped out after it settled with Apple.)

All of the non-SEPs Motorola asserted against Apple in U.S. federal court are at issue in this litigation. Apple doesn't appear to be scared of this case, but on the bottom line any delay -- a few months in this case -- is beneficial to Apple while Google desperately needs some leverage in order to stop Apple's patent assertions against Android.

Apple is now reasonably close to certain infringement findings involving Android and affecting the ecosystem beyond Samsung. Also, Samsung is unlikely to have leverage with its non-SEPs-in-suit, which isn't Google's fault but means Samsung can't solve the problem through its counterclaims.

This company manufactures more than 40 percent of the world's consumer electronics. It was the 20th Android patent license deal in total (the 19th that Microsoft announced, plus Apple did a deal with HTC), further exposing the absurdity of Google's claim of Android being "free".

The Mannheim Regional Court denied Google's Motorola injunctive relief over the only non-SEP it was hoping to enforce against Microsoft in Germany, a push notification patent it's enforcing against Apple as I'll mention further below. An injunction is what Google really wanted (it would have caused a certain degree of inconvenience to Microsoft's German email users), but it owes Microsoft a license under an ActiveSync license agreement. The patent will expire before an appeals court will rule on Google's request for an injunction. Google could theoretically seek damages for past infringement (for the period before Motorola was acquired by Google), but that part of the case has been stayed because of doubts that this patent is valid at all. Google will most likely get nothing out of this patent assertion.

The decision was made on April 19 and published on April 25. Motorola's initial royalty demand from Microsoft was $4 billion, annually, which means Microsoft would have had to pay the price of the whole Motorola Mobility deal ($12.5 billion) in the form of royalties for three years of allegedly using Motorola's patents in its implementations of the H.264 (video codec) and IEEE 802.11 (WiFi) standards. The court, however, determined that Google will only get a few cents per product (on some products even less than a cent), resulting in an annual FRAND royalty of approximately $1.8 million. And these patents will expire within a limited number of years, so Google won't even recover its litigation expenses at that rate. There's unanimous consensus in the media that Microsoft won and Google lost.

On April 22 the U.S. trade agency found a Motorola sensor patent invalid, affirming (on slightly modified grounds) a preliminary ruling by an Administrative Law Judge. This was the sole remaining patent in the ITC case, and a U. S. import ban could have given Google some leverage over Apple. Google previously appealed the dismissal of three other patents from the case.

Google was an intervenor and its counsel made some good points complementing HTC's defenses, though I believe HTC, whose lead counsel against Nokia (Dr. Martin Chakraborty of Hogan Lovells) also has a great defensive track record on his own, would have won this case anyway. If Nokia had won, it would have been a major win for Nokia enabling it to force HTC and other Android device makers into a settlement, but there's an asymmetry here because Nokia only needs to prevail on a few of its 40 patent assertions against HTC. In fact, it brought the latest assertion against HTC a few days before this trial and decision. HTC and Google need to fend off dozens of Nokia patents, which is why the fact that the court gave short shrift to a single one of them is of limited importance and merely delays the inevitable, which is a license deal under which HTC pays Nokia (unless HTC gets a lot of leverage from its own assertions before Nokia does).

This is Microsoft's 20th deal, Apple has one with HTC, and Nokia and other third-party right holders will undoubtedly also collect royalties on Android. Also, this deal shows that a major Chinese device maker, unlike Google, respects Microsoft's intellectual property.

Motorola had been enforcing an injunction against the email service of Apple's iCloud for more than a year. The appeals court's decision paves the way for an Apple motion to lift the injunction. This is the only injunction Google's Motorola ever got to enforce against any of Google's rivals for more than a day. It never enforced anything against Microsoft (it won a couple of H.264 SEP injunctions in Germany but was barred by a U.S. court from enforcing them). It enforced an SEP injunction against Apple in early 2012 but only for about a day before it was lifted. This here is the only one it ever got to enforce for a significant period of time, and it will go away shortly.

A German appeals court upheld a ruling (including an injunction) Microsoft won last year. Motorola's own sales in Germany are limited, but this decision is a major defeat for Android at large: it's yet another indication to other Android device makers (who have to take care of themselves, while Motorola is controlled by Google, which has a broader agenda) that they really need a patent license from Microsoft. (Most of them have one already.)

So let's count the different outcomes. There were two medium-level defensive wins to which Google contributed (items 1 and 8, slide-to-unlock and a Nokia patent); one minor (but not entirely insignificant) issue affecting Motorola's non-SEP assertions against Apple (item 3, Florida delay); one medium-level defensive defeat for Google (item 2, Android text selection infringes); and eight major defeats for Google falling in three categories:

offensive failures (i.e., failures to get leverage in major disputes, which is what the Motorola deal was all about but hasn't delivered): item 7 (FRAND rate for Motorola's SEPs), item 8 (dismissal of ITC complaint against Apple), and items 6 and 11 (push notification patent assertion against Microsoft and Apple)

It's time Google gave up on litigation and focused on licensing based on a realistic assessment of what its own patents are worth and of how massive Android's infringement issues are.

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About Me

Florian Mueller is an app developer who used to be an award-winning intellectual property activist. His 30 years of software industry expertise span different market segments (games, education, productivity and infrastructure software), diverse business models, and technical and commercial areas of responsibility. In recent years, Florian advised a diversity of clients on the patent wars surrounding mobile devices, and on their economic and technical implications. (In order to avoid conflicts of interest, Florian does not hold or initiate transactions in any technology stocks or derivatives thereof, except that he is long AAPL.) He is now developing games for smartphones and tablet computers.